Question 3 All potential business relationships must be evaluated to identify and assess potential independence and other risks to KPMG. Which of the following is a true statement with regard to contracting with a subcontractor that is not a restricted entity? You need to submit a Sentinel only for subcontractors that are a restricted entity where the financial interest is immaterial and the business relationship is insignificant to the member firm and the restricted entity or its management You do not need to submit a Sentinel for a third party acting as a subcontractor since KPMG will be the primary responsible party in the engagement and the subcontractor is not an audit client You need to submit a Sentinel request that considers the subcontractor and the client as engaging parties and consult the Ethics and Independence team to verify the process or policies for on-boarding Since the subcontractor is not a restricted entity, we do not need to be concern about independence issues and there is no additional action to be done to contract the subcontractor in the engagement Question 4 Which of the following statements is false? We cannot use technology to provide a solution that would otherwise be prohibited to an audit client Third parties involved in developing a KPMG technology product are not subject to independence reviews KPMG software audit tools may be seen as taking on a management function or responsibility if they are used beyond the scope of an audit engagement Member firms are required to review and approve all new or significantly modified technology solutions before they are provided to clients Question 5 Which of the following non-audit services are we prohibited from providing to an SEC restricted entity? A gap analysis comparing the restricted entity's accounting policies, disclosures and internal control over financial reporting with industry 'good practice Generic training on the requirements of a new accounting pronouncement Assessing the restricted entity's due diligence function and providing high- level recommendations to improve it Establishing and coordinating data room activities Question 6 Which entity is a related entity of an IESBA audit client? An entity over which the audit client has significant influence, and the investment represents 5% of the audit client's total assets An entity that has control over the audit client regardless of materiality An entity that has control over the audit client, and the audit client is not material to the entity An entity that is under common control with the audit client, and the audit client and the entity are each material to the controlling entity Question 7 Which of the following services are we permitted to provide to an SEC restricted entity? Establishing and coordinating data room activities Monitoring the entity's compliance with a regulatory requirement Undertaking reference checks of prospective candidates for a new Vice President of Finance Comparing the entity's accounting policies, disclosures, and internal controls over financial reporting with industry 'good practices' Question 8 Which of the following is a correct statement with regard to offering technology solutions to a restricted entity? We can offer a technology solution to a restricted entity where the solution performs an activity that creates financial transactions if the client approves the solution We can offer any technology solution to a restricted entity, as long as the client agrees to accept responsibility for the output We can only offer a technology solution to a restricted entity that performs activities that an audit firm is allowed to perform for a restricted entity We can offer a technology solution to a restricted entity that performs an activity that is in conflict with any of the general principles regarding independence, provided the client agrees ahead of time Question 9 Sam receives a call from the CFO at his listed audit client. The client is holding its annual industry update conference and seeking corporate sponsors. The CFO asks that KPMG be the primary sponsor this year. Which of the following statements is correct? KPMG can sponsor the routine event, but cannot be the leading or primary sponsor of the event and must pay the standard sponsorship fee KPMG can be the primary sponsor of the event if the fee is immaterial to the audit client KPMG is not permitted to sponsor conferences or events hosted by audit clients KPMG can sponsor the event because KPMG routinely sponsors similar events hosted by other audit clients Question 10 Which of the following statements is true? KPMG and an alliance partner can sell an alliance-based solution to restricted entities that includes prohibited services Alliance relationships require a Sentinel Approval Number Allia je relationships are always permitted with IESBA restricted entities Alliance relationships are permitted with SEC restricted entities Question 11 Hina is wondering if she can charge a contingent fee for a non-audit service to an audit client. Which statement below is correct? Hina is prohibited from charging a contingent fee to an IESBA restricted entity Hina may be able to charge a contingent fee to an IESBA restricted entity if the fee is not material to her member firm and is not dependent on an audit judgment related to a material financial statement amount Hina can charge a contingent fee for the audit engagement but not for non- audit services to an audit client I Hina can charge a success fee only if paid at the completion of a transaction for an SEC restricted entity Question 12 You have just become Power of Attorney to your mother who is ill. She has several investments in restricted entities that you are a covered person for. Can your mother continue to hold these investments? Yes, because you do not serve on the audit engagement for the entity Yes, because the investments were obtained by your mother prior to you becoming a covered person No, she may no longer hold investments in a restricted entity Yes, because they were made by your mother and not by you. Question 13 A covered person may hold a loan with an IESBA restricted entity as long as which of the following conditions are met? The loan is obtained under normal lending procedures, terms, and requirements and is not otherwise prohibited by your member firm All answers are correct The covered person does not serve on the audit engagement The loan was obtained before they became a covered person Question 14 John is a covered person with respect to our SEC audit client, Big Bank. He would like to take an additional mortgage loan for home improvements including a new roof for his house. Is John permitted to obtain this mortgage from Big Bank? No; he is a covered person and may not obtain an additional mortgage from Big Bank for this purpose Yes; he is permitted to obtain a new mortgage loan with Big Bank because it can be grandfathered Yes; he may obtain the mortgage as long as it is not material to his net worth Maybe; he may obtain the mortgage from Big Bank if there are no other suitable lenders available Question 15 Which of the following actions must you perform to ensure your spousal equivalents relationships comply with KPMG independence policies? Report all reportable investments that your spousal equivalent has on the KPMG Independence Compliance System (KICS), if you're required to maintain a KICS account Check KICS and/or KPMG policies before you or your spousal equivalent acquire any new investments Request their financial information only when you have to submit your annual independence confirmation or if you are selected for any independence compliance audits Provide access to KICS and KPMG policies to your spousal equivalent and let them monitor compliance on their own without your involvement Question 16 Under which circumstances may a covered person hold an overdraft with an SEC restricted entity? When the overdraft is not material to their net worth When the overdraft is tied to a credit card or savings account When the overdraft is tied to a line of credit or a loan o As long as they are not on the audit engagement, a covered person can Chold an overdraft